Assume an Economy Is in Equilibrium at an Output Level

question 254

Multiple Choice

Assume an economy is in equilibrium at an output level of $600 billion. If government purchases decrease by $75 billion, then at the output level of $600 billion, there is

• A) an unplanned increase in inventories.
• B) an unplanned inventory change of zero.
• C) either an unplanned increase or decrease in inventories depending on the value of the MPC.
• D) an unplanned decrease in inventories.

---

Definitions:

Disposable Income

The net income available to individuals or households after all taxes have been deducted, which can be spent on consumption or savings.

Autonomous Consumption

Represents the amount of consumption that occurs no matter the level of disposable income, indicating basic living expenses.

Disposable Income

The amount of income available to households after taxes and social security charges have been deducted, available for spending or saving.

Consumption

The total amount of goods and services consumed by households and organizations within an economy.